Annual Mileage

Meaning and Definition

Annual mileage refers to the estimated number of miles a vehicle is expected to be driven within a year. It is an important factor in car finance as it helps determine the appropriate terms of the loan or lease agreement, including mileage limitations and potential excess mileage charges.

Why it is important to know

Understanding and accurately estimating annual mileage is crucial when entering into a car finance agreement. It helps in determining the appropriate mileage limit for the lease or loan, ensuring that it aligns with the borrower's anticipated driving habits. By considering annual mileage, borrowers can avoid exceeding the agreed-upon limit and incurring additional fees or penalties.

Example in car finance

Suppose you are leasing a vehicle and the lease agreement specifies an annual mileage limit of 12,000 miles. This means that you are allowed to drive up to 12,000 miles per year without incurring any excess mileage charges. If you anticipate driving more than this limit, it may be advisable to negotiate a higher mileage allowance or explore alternative financing options that better accommodate your driving needs.